Analysis of the socio-economic implications of the food and grocery retail revolution in India

Abstract

Retail is one of the largest industries in India accounting for about 8% of the employment. Estimated at $350 billion, the Indian retail industry is poised for a major shake out with the expansion of the organized retail. The organized retail space is perhaps the most happening sector in the Indian Economy, estimated to be around USD $8 Billion. With the growth of organized retailing estimated at 40% (CAGR) over the next few years . Food and grocery enjoys the biggest consumer spending, at close to 40%. 77% of India depends on agriculture for its livelihood. As India prepares to become the economic super power, it is essential to ensure that the 700 million strong rural populations are part of the growth and development. The problem plaguing the rural mass is that the majority of the farming is done on subsistence basis. AT Kearney in a report ranked India as the top emerging market for global retailers. The retail industry in India as a whole is estimated to be worth Rs.1036, 000 crore (2005-06). Organized retailing constitutes a mere 4.7% of the total retail market (Rs. 48,500 in 2006). With a projected growth rate of a staggering 37 percent per annum, the organized retail space has been seeing frenetic activity in the recent past. Investments to the tune of Rs. 200 Billion are slated to be infused into the Indian retail Industry, with bigwigs such as ITC, Pantaloon, Reliance, TATA, Bharti-Walmart queuing up to get a share of the bounty. Although FDI is not directly allowed in the sector, the government seems to be laying the ground for opening up the sector very soon. This has created an Industry landscape that is undergoing fundamental reorganization combined with expansion. Given the size and the potential power of big retail, it occupies a very important place in the wider socio-economic context of India. The tremendous activity that the industry is experiencing will have a ripple effect throughout the Indian economy and perhaps outside it too. We are interested in understanding these trends – who are going to be the winners, who are going to be the losers, what are the opportunities and what are the threats. A lot of available analysis has focused on the problem from a strategic business point of view. But there has not been a comprehensive study of the big picture that reflects the rich complexity of the situation. We wish to fill this gap. We interacted with various stakeholders in the retail value chain to arrive at the implications of the growth in the organized retail mainly on food and grocery industry.